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Why Apple Watch Pricing is Brilliant

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90s-snap-bracelet-photolist-500Until Monday I was “that guy” fully believing Apple wouldn’t introduce a “watch” – maybe some kind of wearable (I had imagined a slap-wrist bracelet thing with Apple awesomeness) – but not a watch. I felt that (a) some kind of “remote extension” to the iPhone/iPad made a ton of sense but (b) “nobody” wants a watch. And then team Apple strutted their beautiful stuff, and I thought “gee willikers, at $99 that could just be a hugely adopted mainstream device.” But when the $349 price tag appeared, I scoffed and hemmed and hawed (note: no, I didn’t actually haw).

I woke up this morning thinking a little different. At $349 they might just have created another phenom.

At $99, I’ve realized, it may have been ready for mass adoption, but then – the masses may well have not adopted it. It’d be up for comparison with the various crud coming out of generic manufacturers. But not at $349.

What I believe Mr Cook and his cadre have created, at this much higher price point, is another high-falutin product. One owned by those with disposable income, enough that they’d “toss it away” on a “gimmicky” product. One with built-in scarcity.

In other words: they are re-creating want in a product, maybe even almost-need to those who can’t just have it.

Unlike the iPad, whose value I saw upon announcement, the Apple Watch is not so clearly framed in my mind. I can’t yet visualize how I’d use it on a day-to-day basis, which always slows down my likelihood to adopt.

But, I can now see the want that consumers will inevitably feel. The pride with which the early adopters will strut down the streets, wearing obviously too-short sleeves to ensure that everyone around will see they were first.  And one day it’ll drop to $299, then eventually some much more accessible price, perhaps even as low as $99 for a Watch Mini in a few years. Smart.

6 Reasons Why Apple Won’t Announce NFC Payments

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stuffed-costanza-wallet

DisCo-Stan-Za

Disclosure: This is a Guest-contributed Post

In the early part of the last decade, when everyone was carrying blackberries and phones, the big buzzword was “convergence.”  We couldn’t wait to have our phone mashup with our email device and carry just one electronic gadget that did both.  The iPhone launched and, though Blackberrys had added phone capabilities, this was true convergence as you could do email, browse the web, make phone calls (sometimes depending on AT&T), and listen to music.  This was the first widely adopted and functional “SmartPhone”.

We’re still looking for that great convergence of your Smart Phone with our wallets and every Apple release is preceded by rumors of Near Field Communication (NFC) and mobile wallet.  Here are the reasons why as much as I’d love to ditch my George Costanza-sized wallet for one device, this isn’t going to happen this year:

1. Stores don’t take NFC

Sure there are some stores that have NFC terminals, but those account for about 2% of all terminals world-wide.  For those drugstores like CVS and Duane Reade that do have NFC, it’s painful to watch a clerk try to be helpful when they have no idea how the technology works.  Apple won’t ship a phone with NFC payments that only works in some stores, some of the time.

2. It’s not Globally Equivalent

When Apple ships a product it generally is the same product around the globe.  There aren’t iPhone 4x’s in Singapore and iPhone4z’s in Germany.  The world gets the same platform with a few modifications to radio frequencies.  Sure, they add currencies and countries to iTunes over time, but a core capability always ships around the globe within months.

3. Apple isn’t first to market

Remember the Creative Nomad Jukebox.  Most of you won’t, but this was one of the many MP3 players that launched before the iPod . How about the Treo mobile phone and email device. Apple is notorious for not being the first to market with a piece of hardware, but when they launch getting it so right that it blows everyone away.  There are plenty of people trying to do NFC like ISIS – the consortium of carriers, MCX – the consortium of merchants, Google – the consortium of Google.  Apple is happy to wait and watch how they fail, let them educate the market and spend to “terminalize” stores and then swoop in many years later with an updated PassBook that you’ve been using to go to concerts, movies, board airplanes, etc.

4. Payments is messy

Payments is a complicated beast that has so many hands in the cookie jar of a transaction taking their crumbs that it’s hard to distinguish from beltway politics.  When you think of where apple would fit in the ecosystem, they closest you get is a PayPal solution for online, where they can set the merchant discount rate.  At the store, unless they became their own payment mark (not happening in 2 weeks), then they’d be riding on someone elses “rails” (Visa, MasterCard, Discover, Amex).   Sharing in this transaction with a partner upon whom they’d be reliant is not a very Apple thing to do.  They own customers and ecosystems.  They don’t share so well.  Also, payments is a high-touch, customer complaint wellspring.  Without accruing a lot of value to Apple, it doesn’t seem likely they would work to add this without nailing all the other promotional goodness that would yield benefit.

5. Apple isn’t an advertising company

The real money is in promotions and advertising where you don’t take .05% of a transaction,but get to take a bigger chunk by delivering a lead or changing customer behaviour. In previous efforts around advertising, Apple hasn’t had the stomach for these messy and high touch endeavors.  Look at iAd and why you don’t see Apple competing, seriously, with Google or even Facebook on that front.  They make software and hardware.  They generally aren’t great at services.

6. Swipe isn’t broken

Finally, Apple likes to create step-change in consumer experiences.  Swipe isn’t broken, nor does tap add that much ease of use and simplicity.  Anytime I’ve stood behind someone trying to pay with their mobile phone, I watch as customers get mad while they try and open the payments app, enter the pin code, and wait for the clerk to understand what’s happened because they didn’t hand over a credit card or cash.

So, while Apple may launch a neat way to share songs or photos using BlueTooth LE or NFC, or greater enhancements to their ecosystem of entertainment like a more robust remote for your apple TV, I don’t see payments coming anytime soon for physical world transactions.

Expectations and Thoughts for CES 2013

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I love the smell of CES in the morning.  Seriously, I *love* CES (here’s my walkthrough the show last year with Robert Scoble – be warned – its 45 minutes long), though I’d love to see them move it back in the year a few weeks.  CES is like SXSW, except people actually get some work done in addition to all the partying.  I love the vaporware demos sandwiched in between the unnecessarily huge screens and the neon. Lots and lots of neon.  LOVE IT – and no, this isn’t a long, drawn out sarcastic rant.  But I’m taking a break from my annual “CES Tips” lists, as there’s nothing substantive to add.  Instead, here’s some thoughts on what I’m expecting next week:

Nothing Revolutionary
That might sound weird, but I’m just not expecting any “big new thing” at this year’s show, instead lots of “mostly better things than last year”.  Bigger screens.  Thinner screens.  Lighter phones.  Longer batteries.  The major keynotes are from Qualcomm, Panasonic, Verizon, and Samsung – not one of these companies has a history of revolutionizing the show.

But yet, lots of cool updates
While nothing should blow us away, I’m expecting tons of improvements to other products.  More smart TVs with more smarterness to them.   Lots of UltraHD/4K TVs (sigh). More well-done AirPlay integrated devices.  It’ll be fun.

Especially OLED
Coolest thing at CES 2012 were the 4MM thick OLED TVs that didn’t ship in 2012, despite promises they would.  Coolest thing at CES 2013 will be the 4MM OLED TVs that might actually ship in 2013.

Meme Prediction: Complaints about the lack of stuff
If there’s one thing that follows the theme of “nothing revolutionary” its listening to everyone, their mother, and their mother’s facebook friends complain about nothing being new at the show. You shouldn’t be expecting something big, and whining about how you could’ve stayed home is just annoying.

Potential sleepers: Verizon & Qualcomm
Interestingly, both have keynotes, and both have large booths (and near each other).  If I had to put money on “doing something unexpectedly big” I’d place on either, or both of these companies.

What I’d love to see, but don’t expect
Flexible displays.  I’ll go so far as saying there’ll be *nothing* exciting in consumer electronics and mobile devices between now and when the first generation of devices with flexible/bendable displays arrive.  So I’ve got a secret hope that even prototype stuff will emerge from someone’s labs at this year’s show.

What I’m already bored of: More Tablets
I still haven’t seen a single product from a single company that defines a “tablet market” and I’m not expecting that to change at CES.  But, I am expecting loads of cheap tablets that might do well overseas, which is all fine and good.  Yawn.

I’m Betting On: Smarterer TVs
Every single TV company will announce new Smart TVs.  And every one of them will continue to make TVs that are harder to use than they were before.  Bummer.

Who Will Be Missing?
Amazon, Google, Microsoft, Apple – the four companies that would make the show dramatically more interesting.

That’s about all I can think of.  Shame is I’ve got so many other commitments at the show this year I have no idea if I’ll even get to walk the floor.  C’est La CES, C’est La Vie!

5 New Reasons Why Apple Might Not Build a TV, Yet.

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So my last time around, I was pretty “pro” on the debate of Apple building a television set device product thing. I actually was following the topic fairly heavily, and bullishly, through CES last year, when the topic just kinda sorta disappeared.  For a bit I had a hunch they had intended to launch one in the Winter of 2012, then something fell apart with it, as the rumor mill simply hasn’t been the same since.

The two reasons I surmise why they may have planned, then pulled, a set are: (1) they weren’t happy with the physical product, possibly as a direct result of LG/Samsung demoing OLED TVs at CES this year, or (2) couldn’t pull together the content/partnerships they needed to make it the success they demand.  Then again, maybe they never had a plan to do one and finally the tech media moved on to another topic.

But here I am just shy of a year since my last post, and with some new thoughts.  In no particular order…

1) Apple makes “small” stuff. Every current product they make can be easily carried out of a store.  In fact, you can almost sense it by comparing sales rates of iPhones/iPads to iMacs.  TVs are even bigger, and while Apple has magic, you just can’t shrink the physical requirements of shipping around 55″ flat panels. While they could certainly have a white glove level of service, it doesn’t “feel” Apple to me if I can’t get it in the store, and bring it home – now. Apple is amazing at satisfying the on-demand lifestyle, and a big bulky box shipped to your door isn’t quite the same.

2) Apple makes “frequently replaced” stuff. Every current consumer product Apple makes has replacement cycles under 4 years, some 1-2. TV is 7+ and I don’t see that changing.  There’s a certain point at which the inconvenience and hassle of mounting (and unmounting) big things to walls trumps the sexiness of any product.  It’s one thing to decide on a whim you’ll replace your phone or laptop, it’s another to deal with TVs and inputs.  And even if there’s a magical solution for wall-mounting and a magical solution for cable management and a magical solution for set-top boxes, game consoles, and other equipment, consumers are used to this cycle, and that’s a much much harder thing to change.

3) Apple makes “clean” stuff. Of all my Apple products, my iMac has the most potential cables to connect, most of which aren’t used, and comes with wireless peripherals. My iPad has but one.  Clean, simple, elegant – Apple.  TVs, on the other hand, must be connected to other stuff.  Unless they can actually solve A/V Receivers, Set-Top Boxes, Game Consoles, and DVD/Blu-Ray Players in a single product, this mess continues to exist.  The living room TV world is practically defined by gozintas, so unless this is a TV set just for my bedroom, or Apple can convince consumers to replace a whole lot of other boxes, it’s putting an Apple product inside a big mess.  Doesn’t feel like their style as I see it.

4) Apple makes “transformative” stuff. Smartphones before Apple, with the exception of Palm products (early days) and a few other rarities, were ugly clunky awful things that came with plastic pens. Then the iPhone came, and most smartphones are better as a result.  The iPad too, transformed the entire concept of a tablet, one so good nobody else is even realistically in the market right now (and probably won’t be for a while).  They did it before with the original iMacs.  In each case, there was an experience to transform.  But TV isn’t broken in nearly the same way – yes, there are issues, but for the most part, most consumers utterly love the way TV works today. Further, in order to transform a TV experience, Apple would need to go leaps and bounds beyond current offerings.  I’ll never count the company out on anything, but the entrenched TV ecosystem is a bigger badder monster than anyone’s taken on before.  I have a very, very hard time seeing a transformation happening here.

5) Apple makes “well-distributed” stuff.  Every Apple product is available anywhere in the US, as well as Canada and oodles of other countries.  Even when the iPhone was only on AT&T you could buy it – you might have to switch carriers, but you could buy it.  Many rumors put Apple partnering with cable companies (eg buy an Apple Television from Comcast with a 2-year contract, at a steep discount), but this limits distribution regionally in a major way.  This would force them to deal only with satellite companies, but that brings an entirely different set of hurdles.  This effectively rules out distribution partners as a deployment vehicle, which then in turn limits the product to being a “dumb set” – something that seems even less likely for the company.

I may be wrong.  Heck, it’s Apple, they know how to solve problems others can’t even begin to figure out.  Let’s also be real and notice that their little “hobby” is already the #1 Internet streamer on the market, in a single year! But something about the magic needed to make a TV might be out of reach for a little while longer here.  Seems like until OLEDs become affordable (or some other equivalent step up) and until there’s a viable MVPD with full Internet distribution, we are going to have to wait a little longer for a glowing bezel to show up in our houses.

Why Apple Will Make a MacBook Touch (eventually)

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A few weeks ago someone mocked up a concept MacBook touch, and in a nutshell, they way-y-y-y-y overthought it.  After a week(ish) using my iPad with an external keyboard, I can see how the worlds could and should collide.  And I think it’s exactly what Apple plans to do – one day. The concept is already as much as there in their products anyway: ship Mountain Lion with the ability to “launch” iOS.  That’s it.

In the current OS X, Lion, we already have LaunchPad, a feature clearly designed for a touch-screen interface, mainly because it’s the exact UI for iOS apps.  This would/should be touch-enabled.

Next, OS X already has an App Store, the inventory of which could easily expand to include iOS apps.

The LaunchPad would become the primary “desktop”, and Finder would move to be an app instead of the primary navigation metaphor.

Apps could then be written as OS X, or OS X with touch, or iOS.  Standard OS X apps would function like they do today, expecting a mouse + keyboard interface.  That’s the easy part.

iOS apps would go into full-screen, thought likely not include the ability to rotate – but maybe they wouldn’t have to.  The next-gen MacBooks are already rumored to go retina anyway, which provides enough pixels for a portrait-mode app to run on the screen size of a 13″ laptop.  Granted, a ton of apps would work poorly – things that require lots of motion sensitive or heavy gesture inputs.  But maybe that’s okay.  Maybe this isn’t about a laptop with great Infinity Blade capabilities, it’s a bit more focused on productivity.  More on this in a bit.

OS X with touch apps would be able to support mouse + keyboard + touch interfaces.  This is the tricky part.  There are times when touch works great, other times when the mouse is ideal.  For example, a pull-down menu is going to be too tiny to easily work with a finger, but the mouse is perfect.  Similarly, mouse-overs are useful for many applications, and the pixel-level work in design apps could never be done without a mouse.  But moving files, selecting apps to run, and creating free-form quick designs are all radically better with a touch input.  Gestures are awesome methods of navigating through computing interfaces.  There’s a right balance, and as long as Apple can clearly delineate best practices, I think some great new experiences would emerge.

Combining the full power of OS X and iOS brings great power, and accordingly, great… You know.  But in all seriousness, this isn’t meant as a “make a MacBook all fun like the iPad” nor is it “turn the iPad into a productivity center”.  It’s both.  The computing era has evolved to the point where touch is a key part of things.  Further, Apple is uniquely positioned to create a product like this, where the touch features augment the overall platform, as opposed to just being gimmicky.  Lastly, they’ll create yet another leap forward that their competition will have to spend eons catching up to.

ps – for those wondering, I’m using the Logitech Ultrathin Keyboard for iPad. I love it.  I started with the Apple Wireless Keyboard (with great sleeve by SF Bags) but ultimately preferred Logitech’s solution.  Amazingly.

It's got a pen?!

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For the 14 people who missed the Super Bowl this year, a “notable” commercial was the debut of the Samsung Galaxy Note, which basically enlisted virtually every trick of the trade.  Hipster rock band? Check. Playful teasing of Apple users? Check. Flashy seeming new gadget? Check. Tablet with a stylus? Check.  Wait a sec, rewind, what is this, 1998?  Or, as I tweeted (and BTW, Twitter – yet another simple feature: enable easy embedding and reblogging of tweets to other platforms, because screenshots? really?):

So my advice this evening is to Samsung and everyone else competing with the iPad – which is actually nobody in reality.  If you want to play this game, you need to stop grasping at straws.  Go build a damn good product and the market will support your endeavors.  I’d heard some interesting buzz about the Note, that it might be the first “other” tablet to give the iPad a real run for its money.  And then? StylusGate.

Now wait, maybe it’s not about consumers.  Maybe it’s enterprise or other specific applications.  I’m sure there’s a decent market in several verticals for a tablet with a stylus (something I blogged about a full year ago now!).  But your marketing wasn’t about some productivity device, it was about consumers.

Does anyone really think any hipster, businessman, student, soccer mom, or any other typical consumer with an iota of self-respect would walk around using a stylus when everyone else doesn’t have to and can accomplish the exact same goals?  That commercial didn’t show a product superior to an iPad.

That’s the key thing here.  The stylus is showing up in an effort to get on par with the iPad’s user experience.

Except it doesn’t.

Not even close.

Why Smart TV User Interfaces Suck

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Please don’t look at the following images on a full stomach:


Ok, sorry I had to do that, but it’s important.  And to my friends on the TV manufacturing side of the world – it’s not your fault!  It’s not your fault! Most “Smart TV” user interfaces, suck, and you’re doing your best.  But fundamentally they violate so many rules of user experience design. But why are they so bad?  In a nutshell, its for the same reason you don’t expect loggers to sell fancy high-end furniture (think about that one for a second).  The products are being built from the wrong end of the production team.

For the dining room table, what do you think, arrow foot or ball foot?

Let’s agree that user experience design is a challenge to begin with.  Apple does it great, everyone else, not so much – and even Apple products have flaws.  Further, virtually everything about a “ten foot” user interface (the terminology we use to describe what happens on-screen on your TV) is a broken interaction model, so this is going to be crippled no matter what.  I’ll write about this more in the future, but I believe there’s a fundamental breakdown on the limitations of what you can do with any 10′ UI and a remote control, regardless of gestures, speech, etc.

Next, per my logger analogy, effectively the teams building these products have absolutely no experience nor expertise at this kind of design.  The world of consumer electronics has (barely) evolved from dials, knobs, and switches to doing highly complicated interfaces on screens.  Not only that, every year the requirements are changing!

And since this is a new field (despite almost 20 years worth of ten-foot UIs), there are very very few folks out there who have dived deeply into this problem (the Wikipedia page on the topic barely even requires a scrollbar to read everything).  So the same people who are used to just getting the TV to work right, are now also in charge of creating “an experience”.  I think this is a guaranteed to fail situation, and it’s unfortunate for everyone involved.

The last "easy" TV user interface.

I do have some tips and thoughts for these UIs, since I can’t effectively get everyone to just up and stop making them (pretty please?).  First, you can read my comments a while back on designing better Boxee and Google TV apps.  Now, here’s three more things to think about:

  • Stop making things look like Commodore 64 graphics.  Seriously, I understand the graphics processors inside the TV platforms are low powered inexpensive solutions, but people have a natural (bad) reaction to seeing such low quality graphics on their beautiful HD sets.  If you can’t match them up, find ways to cut down on the overall interface and use the scarce resources to make things prettier.  See Boxee, Google TV, and Apple TV for the “prettier” 10-foot experiences.

Now in beautiful Full 1080p HD

  • Understand a 2D “grid” of options.  Many of these UIs create multiple planes of interfaces, yet fail to recognize the user has to navigate with a simple UDLR remote control (or wand or whatever).  This creates unpredictable experiences, and makes your user less naturally comfortable with the interface.  You should be able to look at the screen and always know “what happens if I push the Up arrow button”.
  • Reduce button clicks.  At no point should the user have to click more than 3 times to get from one part of the screen to another, and you should never create an internal scrollable region.  For example, my VUDU service (which I love) has me scroll through long lists of movies when browsing a category (such as Comedy/Drama, which, let’s face it, really means depressing movie with some funny moments).  But, as a result, if I want to change the category,I need to scroll all the way up to the top of the screen again to choose a new option.  This is too much work!

Ultimately, this again reinforces my belief that anything new coming from Apple will be highly based on AirPlay concepts, and the 10-foot UI will one day be a thing of the past.  And what will replace it?  This.

Did Manufacturers Lose $2 BILLION on Android Tablets Last Quarter?

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Strategy Analytics announced today: “Android Captures Record 39 Percent Share of Global Tablet Shipments in Q4 2011”.  Bloggers go nuts with it, headlines such as “Android Grabs 10% Tablet Market Share from Apple in Q4 2011” and “Android tablets gain ground with 10.5 million sales in Q4 2011“.  Here’s a quick fact check: the report was about tablets shipped, not sold.  Sounds like a minor little nit, but it isn’t, and if you’ve never been inside the actual business of hardware before, it’s a fairly common mistake.

Shipping a product implies it’s been manufactured, packaged, and transported into a distribution facility, and in some way allocated by a retailer.  It hasn’t necessarily been purchased by the retailer yet, nor has it been sold to a consumer.  Which means a massive cost was incurred by the manufacturer, with no revenue so far.  Further, even if the retailer has made some form of purchasing agreement/commitment, they typically have many many ways to back out if units aren’t moving.  All, of course, at the expense of the manufacturer.  This is how Logitech lost $100 million on the Revues, as they made a bunch, but couldn’t sell them.  As Seinfeld might’ve put it: “See, you know how to ship the product, you just don’t know how to sell the product and that’s really the most important part of the product, the selling. Anybody can just ship them.”

So let’s go back to that report.  10.5 million Android tablets shipped in Q4.  Not too shabby.  Now Apple did just announce they sold 15.4 million iPads in the same quarter.  So we know we aren’t talking oranges-to-oranges comparisons already.

I’m going to add in a personal observation/anecdote here, take it with a grain of salt.  In the past year, at over 20 conferences, 30 flights, and possibly hundreds of meetings, I’ve seen about 15 android tablets in use “in the wild”.  I’ll go as high as 20.  That’s it.  Not only isn’t it close to 40%, it’s not even close to 1% of the tablets I’ve seen in use, in every major metropolitan area in North America.  But that’s not a fair way to look at it, so I’ll assume I’m off by a few percent, especially including the international market plus the recent hotness of the  Kindle Fire.

But let’s pretend they somehow sell-through 5% of the total tablet market, as defined by iPad sales.  That’s 750,000 units sold.  Maybe a little low, but as I scan the numbers from a bunch of different reports, doesn’t seem too far off the mark (NPD reported a grand total of 1.2 million non-Apple tablets sold between Jan-Oct last year).  Let’s bump it to a cool million, just to seem “fair”.  That leaves manufacturers with 9 million unsold tablets.

According to a variety of reports (best from iSuppli), tablets cost manufacturers between $200-$300 to manufacture, on average.  So again, averaging it all out (which isn’t exactly right, but that’s kind of the theme of my blog anyway, right?) at $250 times 9 million units equals holy crap.

$2,250,000,000

Oh, and this doesn’t include marketing, packaging, shipping, warehousing, taxes, and all the other costs involved.  Please, somebody, show me how I’m wrong!  No, seriously, I don’t actually want to be right here!

So when might Apple announce a television?

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Seems like Apple has news coming later this month.  Regardless of your feelings about Apple, it’s safe to say they have mastered the art of the product launch like none other.  Even when virtually every detail of a new product gets leaked due to it being stolen lost at a bar, they still master the news cycle and generally enchant and entertain.  Some might argue they simply do things whenever they want, others would surmise they do it entirely calculated on a spreadsheet based on maximizing sales.  My guess is they do it “when they can” – the moment they are done with the first production line and have the shipments queued up, the media invites go out, a few semi-leaks pop up here and there, then off to the races.

This works great when you can fit a few hundred phones into every crate and airdrop ’em over the US at the same day/time with ease.  Sure it’s costly, but in the grand scheme of things, no big deal.  The boat’s left the harbor at the same time, and within 3 weeks the full distribution cycle is up and running.

But now we’re not talking about a gadget that fits in your pocket, it’s an Apple Television (right? right?).  And despite what self-aggrandizing promoters some analysts say, it’d be my guess that they ship them in more sizes than just 32″ and 37″ (seriously, how did anyone actually believe that?).  Unless they’re about to pour forth with statements about how those are actually the ideal sizes for a display, I don’t think they’re about to exist in a market where size really does matter and play on the small front.  I’d guess we see one at ~32″, ~40″, ~50″, and ~60″ – those are the main categories of TVs sold today.

Yeah, I'm on a truck. Life's just that good. I have a keg back here too.

And now is where we face our hurdle: these TVs are big.  The box for my Samsung 63″ plasma barely fit into a pickup truck!  You can’t exactly airdrop hundreds of each model to Apple stores.  In fact, every aspect of the logistics to pull off Apple’s typical surprise & delight maneuvers is quite tricky here.  So that’s problem number one – in my guess they solve this via the “and you’ll all be able to receive your units 30 days from today” type of solution.  But there’s no way you’ll hear “and you can go get them in Apple stores nationwide this afternoon.”

Second, unlike phones and iPads, and even computers, TV buying has a lot more seasonality to it.  And other than a core set of fanatics (nope, I’m not at that level yet), most people aren’t about to pick up new expensive living room gear for any given reason.  This is actually one of the trickiest nuances of the TV world (on the hardware front) – it’s really hard to get someone out of their buying cycles.  Sure, if someone was already planning to get a new set next holiday season they’ll consider getting one in June or August or whenever.  But if not, (question mark).

So, they can’t announce too soon.  Or too late.  They can’t announce in the first half of the year.  But if they wait til too late, they’ll impact supply chain in a painful way and potentially affect sales.

My money’s on a late Spring announcement, shipping in the Summer.  Even though it’s traditionally a terrible time to introduce a TV set to the market, it’ll give them more time to get the logistic down, the stores reformatted, and everything else into full swing in advance of the Q4 buying season.

But then again, it’s Apple, so “the rules” just don’t apply.

The Dirty Little Secret of The Future of TV: Data [Guest Post]

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This is a guest post by Anil Podduturi, you can find his bio below.

Gary Myer, who helped found DirectTV, recently penned a guest post for Wired on the future of TV. It comes with a provocative headline: Why Nobody is Challenging the Pay‐TV Providers.

Myer covers a lot of ground in the post, but it’s mostly familiar territory for readers of this blog: Unbundling, linear vs. VOD, social, device ecosystems. After setting the scene with the 40k-foot industry landscape, Myer makes some bold claims about what’s gating television innovation that dramatically oversimplify industry dynamics.

The biggest problem with Myer’s argument is that it ignores the major impediments to progress for both newcomers and incumbents – these include product design in all of its various incarnations, but let’s not forget content rights, content cost structures, and the economic realities of unbundling. It’s not as simple as cracking a new navigational paradigm for on-demand video or acquiring more content.

(For more on the nuances of this industry quagmire, see my Storify from last week capturing a Twitter conversation between Dennis Crowley, Dan Frommer, Hunter Walk, and others, that all started when Dennis’s grandmother couldn’t watch the Pats game in Florida without a $350 DirectTV Sunday Ticket subscription.)

At the end of the day, video services of the future must increase the value of the monthly subscription through a mixture of distribution, content, and user experience, but getting there will require a data-driven approach to the business that embraces platform dynamics and wedges the economics of content in favor of consumers.

This approach should extend to every dimension of the business, including content acquisition. Myer acknowledges that content acquisition is one of the biggest challenges for would-be disruptors. In fact, it’s his hypothesis for why nobody is challenging the pay-TV incumbency:

What’s the Problem

To seriously compete with existing pay‐TV providers, new providers need to offer at least what the existing providers offer, plus added benefits (more content, lower price, superior user experience, etc).

Successful internet‐video providers will offer a comprehensive catalog of à la carte/on‐demand content –- with an intuitive user experience. Existing internet video players are offering only a fraction of the programming of pay‐TV providers and they are securing new content rights haphazardly. If you’re going to compete with the incumbents, why guess what programming is important to your customer by only acquiring rights to selected programs?

That’s the old Microsoft embrace-and-extend ploy. I’ll save you my personal thoughts on embrace-and-extend as it relates to product development, but assuming some newcomer could actually afford a content acquisition strategy that successfully equalized the traditional channel lineup, what would be the return on such an astronomical investment, and would it even add value for consumers?

Myer says that newcomers shouldn’t guess what programming is important to the customer, and he’s right. But that doesn’t mean the video service of the future should strive for parity in programming. We now live in a world where the best consumer web products have iterated in part because of data – usage data if your product has traction, but how about general industry research like this Nielsen study that tells us the average US home with a cable package receives about 118 channels, but only watches 17 of them.

The way to increase subscription value isn’t by embracing the same content library, but rather by extending the value of the ~14% of content that consumers do access regularly and augmenting that offering with other relevant content and services. To do that, newcomers should leverage actual consumer data signals if they’re fortunate enough to have built a product that can capture them.

"Let me just write em an email, I can explain it all in a simple email!"

Netflix has built a data-driven product, and this is why Reed Hastings got on stage earlier this month at the UBS Media conference to proclaim that he’s the Billy Beane of digital media.  “We’re very much the ‘moneyball’ content buyers. We’ll look at, OK, we paid X for something, so how many people watched it?” Netflix is collecting and analyzing viewing data that then informs their content acquisition strategy.

Netflix, like the Oakland A’s, must apply a data-driven approach because they simply can’t afford to acquire everything they think consumers might want. It’s been reported that Netflix’s streaming content licensing costs will rise from $180 million in 2010 to $2 billion in 2012. Netflix can’t afford to spend another dime or another million on content that doesn’t directly add measurable value to the service.

But at least Netflix is in position to measure value and apply data-driven learning to its product strategy. This brings us to the supply chain of internet-age content distribution, an ecosystem within which Myer says, “companies need to control at least the device and the service.”

It remains to be scene whether this level of control will prove to be a categorical business imperative. Apple and Amazon seem to think so, and have demonstrated success owning their respective hardware and software stacks.

Netflix, on the other hand, is a service provider that understands platform dynamics and how to extract value and meaningful consumption data at the service layer. Netflix not only operates its service across PCs, tablets, gaming consoles, connected TVs, and phones, but has also developed the technical proficiency to optimize that cross-platform device distribution. This allows Netflix to maintain a direct relationship with the consumer and refine its user experience across platforms.

Incumbents like HBO and Showtime have begun to recognize the value of the direct-to-consumer model with their HBO Go and Showtime Anytime streaming services. Competitors like Hulu and YouTube keep investing in direct-to-consumer efforts to drive greater engagement (Hulu Latino, YouTube Channels). Microsoft redesigned the XBox Live Dashboard as a platform for content providers to go direct-to-consumer. Just this past week, we saw the comedian Louis CK pull off an experiment in content distribution, going direct-to-consumer to the tune of $200k and counting in profit.

These direct relationships, and how service providers leverage them to extract data that in turn informs product development, content distribution, and content acquisition will help shape the real future of television at the service layer. No single service will be able to provide a comprehensive offering so long as there is still exclusive, marquee programming and healthy competition in the device ecosystem. However the dust settles, content must stay accessible and affordable for the consumer.

—
About Anil: Anil Podduturi was most recently VP of Product Strategy at NBCUniversal. Prior to NBC, he led product management at Daylife, MTV Networks, and Microsoft. On Twitter: @anilpod

Why Apple Won't Buy Netflix (or Sony or RIM or …)

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We're like Media. Squared.

I enjoy pondering the question of “who should Apple buy next?”  I think it’s probably best answered in this Quora post, which conveniently includes a history of most of their recent acquisitions, then followed by all sorts of fun guesses.  Some of the companies mentioned include: Square, Pandora, Sony, Amazon, RIM, and many more.  PaidContent lists Apple as a good future home for Netflix.

I’m sure on paper many of these are sound acquisitions.  Some bring good IP. Others good cash flow.  Others good branding and distribution vehicles.  I’d surmise that many a financial analyst could put together very solid plans, and would even wager the discussions happen within Apple from time to time on the topic.  But I don’t think Apple’s buying any of them, and for a vastly different reason, one that won’t make any spreadsheet or pro forma statement anywhere.  It’s about the DNA transfusion.

If there’s one thing Steve Jobs created over the past decade-plus it’s a certain DNA.  It’s a company-wide culture that transcends from product to marketing to customer service to building design.  And inserting hundreds of product managers, engineers, QA staff, designers, etc who come from radically different types of DNA will result in exactly one thing: Brundlefly.

How about an iMinidisc player? Or adding UMD to next-gen Macbook Airs?

My money is on Apple continuing their pattern of only absorbing companies who are either:

  • Small – smaller teams who are tightly focused can have their developing culture be absolutely subsumed by Apple’s
  • Non-consumer facing – ingredient technologies (chips, algorithms, infrastructure) tend to need less of the consumer product dogma that guides the “Apple way” and have less impact on culture

The exciting thing about an Apple acquisition, in my opinion, is watching them take little pockets of technology and turn them into big consumer products far down the road.  Although I would say, of all the companies named above, it certainly does seem like Square could be a good fit from a product, market, *and* DNA perspective, but that’s just from outside appearances.

If AppleTV is 1/3 of the market, who's selling the other 2/3?

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A few blogs are reporting about Strategy Analytics’ recent claim:

Strategy Analytics projects that the market will reach almost 12 million units globally this year, with Apple alone predicted to sell nearly four million devices.

Wow. Pretty bold claim.  Let’s deconstruct it.  Let’s assume it’s a correct prediction:

AppleTV will sell 4 million units, leaving ~8 million for “the rest”.

what do you mean "and the rest"?

Here are “the rest”: Roku, Western Digital, D-Link (Boxee), and… er… I don’t know, how about Logitech? Maybe a few other smaller players, but nothing you and I are buying in a Best Buy, Target, Walmart or Amazon – the only places that matter at all for moving these kinds of numbers.  Yes, there are some other odds and ends in the bizarre category known as Internet Set Top Boxes, but they aren’t mustering up sufficient sales to count here.

Roku: I’ve heard all sorts of things, but lets use publicly available information: as of last January, Roku hit 1 million devices sold.  I’ll assume they’ve at least doubled that in 2011, possibly as much as tripled, due to new products, more viability, and lower prices.  That said, they are now up against an ever-improving AppleTV product.  Even so, let’s assume they can hold pace against the world’s largest marketing machine for digital lifestyle products, and sell another 3 million units in 2012.

Western Digital: You probably haven’t heard of it, but that little gadget your buddy has for watching photos on his TV is called the WDTV Live, and they’ve sold somewhere in the 1-3 million unit range (I know that’s a big range, but it seems pretty fair based on some poking around).  Not a bad showing for a company known for making hard drives.  But in the presence of both Apple and Roku, it’s a pretty fair bet that they aren’t edging out of third place for future market share.  I’ll again be kind with 1.5 million units sold in 2012.

From these guys, only for your TV. Perfect.

D-Link (Boxee Box): Disclosure: I was a core part of the launch teams for both Boxee and the Boxee Box by D-Link, and wish to see them extremely successful, though I am no longer professionally engaged with either company in any way.  And that said, I don’t think they’re anywhere close in numbers yet, and don’t see them hitting the million unit mark any time soon (specifically in regards to unit sales, this has nothing to do with downloads, active community, or positive thoughts). Optimistic high end prediction in 2012: 750K units.

Logitech: $100 million loss.  Let’s move along shall we?

Have the factory spin up about a bajillion of them, nothing will go wrong.

Everyone else: I’ll generously band them all together, and predict they maybe move 500K units.

Unknown entry by traditional consumer electronics brand: Look, anyone can make a media streamer, in fact you can make an adequate one by buying off the shelf parts and licensing open software platforms.  But even the formerly mighty Sony and the young stalwart Vizio is going to have a tricky road in getting a product out in this category that doesn’t include a full end-to-end solution.  And there just aren’t enough to go around.  Maybe Amazon could have some kind of Kindle Fire: Home Media Edition or something, but something tells me they are still getting their feet wet in hardware and aren’t going to jump too rashly into the space (though I’ve been known to be wrong about Amazon and hardware in the past).  Top guess: 250K units.

Grand Total Units Sold, Highly Optimistic Prediction Mode: 6 million units.  Giving Apple TV, with 4 million sales, a 40% market share.  And that’s me being *quite* optimistic, and I’d wager it’s more like a grand total of 4 for the rest.  Or less.  Giving Apple TV a significantly larger potential – and by the way, it’s not exactly Apple’s strongest product.

But their math was so good!

This whole story just reminds me of the time when I was reviewing an analyst report for the *exact same space* back in 2003 when we had just shipped the HP Digital Media Receiver (the first mainstream Internet Set Top Box, by the way).  This was, by the way, before consumers had Flips or other simple video recording devices, digital cameras were mostly a novelty, and there was no YouTube, Netflix streaming, or pretty much anything else to watch on the darned thing.  But still, the potential!

The analyst predicted hundreds of thousands of “streaming video boxes” sold in 2003.  The only snag was, we were literally the only game in town, and we had predicted tens of thousands at best.  When I spoke with the analysts, they said they predicted several years forward, based on consumer interest, to arrive at several million units a year.  Then, they backtracked it into 2003 and, boom, hundreds of thousands.  What could possibly go wrong with this kind of logic?

They sold literally dozens of them